S.I. No. 289/1993 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Finland) Order, 1993.

1. The Governments of the Contracting States shall notify each other that the constitutional requirements for the entry into force of this Agreement have been complied with.

2. This Agreement shall enter into force thirty days after the date of delivery of the later of the notifications referred to in paragraph 1 of this Article and its provisions shall have effect

a

) in Finland

(i) in respect of taxes withheld at source, on income, other than a dividend and tax credit in respect thereof, derived on or after 1 January 1990;

(ii) in respect of tax withheld at source from a dividend and tax credit in respect thereof, on a dividend paid for any accounting period of the company which makes the distribution ending on or after 1 January 1990;

(iii) in respect of other taxes on income, for taxes chargeable for any tax year beginning on or after 1 January 1990;

b

) in Ireland

(i) as respects income tax and capital gains tax, for any year of assessment beginning on or after the sixth day of April 1990;

(ii) as respects corporation tax, for any financial year beginning on or after the first day of January 1990.

3. The Convention between the Government of Ireland and the Government of Finland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital, signed at Dublin on 21 April 1969, (hereinafter referred to as "the 1969 Convention"), shall cease to have effect with respect to taxes to which this Agreement applies in accordance with the provisions of paragraph 2 of this Article. The 1969 Convention shall terminate on the last date on which it has effect in accordance with the foregoing provision of this paragraph.

4. Where any provision of the 1969 Convention would have afforded any greater relief from tax than is due under this Agreement, any such provision as aforesaid shall continue to have effect for a period of twelve months from the date on which the provisions of this Agreement would otherwise have effect in accordance with the provisions of paragraph 2 of this Article.

5. The Agreement between the Government of Ireland and the Government of Finland for the avoidance of double taxation on income derived from the business of sea and air transport, signed at Dublin on 15 September 1965, shall not have effect for any period for which the present Agreement has effect.

ARTICLE 30

Termination

This Agreement shall remain in force until terminated by a Contracting State. Either Contracting State may terminate this Agreement, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year following after the period of five years from the date on which this Agreement enters into force. In such event, this Agreement shall cease to have effect

a

) in Finland

(i) in respect of taxes withheld at source, on income derived on or after 1 January in the calendar year next following the year in which the notice is given;

(ii) in respect of other taxes on income, for taxes chargeable for any tax year beginning on or after 1 January in the calendar year next following the year in which the notice is given;

b

) in Ireland

(i) as respects income tax and capital gains tax, for any year of assessment beginning on or after the sixth day of April next following the date on which the period specified in the said notice of termination expires;

(ii) as respects corporation tax, for any financial year beginning on or after the first day of January next following the date on which the period specified in the said notice of termination expires.

In witness whereof the undersigned, duly authorised thereto, have signed this Agreement.

Done in duplicate at Dublin this 27 day of March 1992, in the English and Finnish languages, both texts being equally authentic.

For the Government

of Ireland

For the Government of

The Republic of Finland

H.E. Mr. Ulf Erik Slotte

Ambassador of Finland to Ireland

Your Excellency,

I have the honour to refer to the Agreement between the Government of Ireland and the Government of the Republic of Finland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which was signed today and to confirm, on behalf of the Government of Ireland, the following understanding reached between the two Governments

With reference to paragraphs 1

b

) and 2

b

) of Article 11 the proportion of one-half of the tax credit available to a resident of Finland to which a resident of Ireland will be entitled under the said paragraph 1

b

) has been agreed on the grounds that, currently

a

) the Irish system of corporation tax provides for the imputation of one-half of the tax paid by a company by way of a tax credit carried by a dividend paid to a shareholder,

b

) the Finnish system of taxing companies provides for the imputation of all of the tax paid by a company by way of a tax credit carried by a dividend paid to a shareholder, and

c

) the rates of corporation tax, being in the case of Ireland, 40 per cent and, in the case of Finland, 36 per cent for the year 1992 and subsequent years.

Thus, the giving of one-half of the tax credit to which a resident of Finland would be entitled to an Irish resident in receipt of a dividend from a company resident in Finland strikes a reasonable balance in these circumstances.

It has been agreed, however, that in the event that the rate of corporation tax or the rate of the tax credit carried by a dividend should change in either Ireland or Finland, the competent authorities of both countries shall notify each other of such changes, shall consider whether the rate of one-half or some other rate is appropriate in the light of the new circumstances and, if the rate of one-half is no longer warranted, the Governments of Ireland and Finland shall renegotiate paragraphs 1

b

) and 2

b

) of Article 11.

I have further the honour to request you to be good enough to confirm the foregoing understanding on behalf of the Government of Finland.

I avail myself of this opportunity to extend to you, Your Excellency, the assurance of my highest consideration.

David Andrews T.D.

Minister for Foreign Affairs

Dublin, 27 March, 1992

Your Excellency

I have the honour to acknowledge receipt of your Note of today's date which reads as follows:—

"I have the honour to refer to the Agreement between the Government of Finland and the Government of the Republic of Ireland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains which was signed today and to confirm, on behalf of the Government of Ireland, the following understanding reached between the two Governments:—

With reference to paragraphs 1

b

) and 2

b

) of Article 11 the proportion of one half of the tax credit available to a resident of Finland to which a resident of Ireland will be entitled under the said paragraph 1

b

) has been agreed on the grounds that, currently

a

) the Irish system of corporation tax provides for the imputation of one half of the tax paid by a company by way of a tax credit carried by a dividend paid to a shareholder,

b

) the Finnish system of taxing companies provides for the imputation of all of the tax paid by a company by way of a tax credit carried by a dividend paid to a shareholder, and

c

) the rates of corporation tax, being in the case of Ireland, 40 per cent and, in the case of Finland, 36 per cent for the year 1992 and subsequent years.

Thus, the giving of one half of the tax credit to which a resident of Finland would be entitled to an Irish resident in receipt of a dividend from a company resident in Finland strikes a reasonable balance in these circumstances.

It has been agreed, however, that in the event that the rate of corporation tax or the rate of the tax credit carried by a dividend should change in either Ireland or Finland, the competent authorities of both countries shall notify each other of such changes, shall consider whether the rate of one half or some other rate is appropriate in the light of the new circumstances and, if the rate of one half is no longer warranted, the Governments of Ireland and Finland shall renegotiate paragraphs 1

b

) and 2

b

) of Article 11".

I have further the honour to confirm on behalf of my Government that the foregoing is also the understanding of the Government of Finland.

I avail myself of this opportunity to extend to you, Your Excellency, the assurance of my highest consideration.

Dublin, 27 March 1992

H.E. Mr David Andrews

Minister for Foreign Affairs

Dublin

GIVEN under the Official Seal of the Government, this 21 day of September, 1993.

ALBERT REYNOLDS,

Taoiseach.

EXPLANATORY NOTE

This Order gives the force of law in Ireland to the Agreement with the Republic of Finland set out in the Schedule to the Order.

The Agreement provides for the allocation of taxing rights between Ireland and the Republic of Finland and for the granting of relief from double taxation with regard to items of income and capital gains which, under the laws of Ireland and the laws of Denmark, may be taxed in both countries.

For example, items such as business profits, interest, royalties and gains on movable property not arising through or connected with a permanent establishment in the source country, profits from the operation of ships or aircraft in international traffic and non-government pensions are taxable only in the country of residence of the recipient. On the other hand, remuneration in respect of services rendered to a government of one of the countries is normally taxable only in that country, i.e. the country of source.

Where both countries continue to have taxing rights, for example, with regard to business profits arising through a permanent establishment which an enterprise of one country has in the other country or dividends received in one country from the other country, the Agreement provides that the country of residence of the recipient will allow a credit against its own tax for the tax imposed on the same income by the country of source. Thus double taxation is relieved.

Rentals received by an Irish enterprise in respect of the leasing of aircraft or ships which are in use in international traffic will be exempt from Finnish tax, in particular Finnish withholding tax.

Capital gains arising from the disposal of immovable property and of shares linked with immovable property may be taxed by the country in which the property is situated. Capital gains arising from the disposal of other property are normally to be taxed only in the country of residence of the taxpayer unless they arise from the disposal of assets of a permanent establishment or fixed base which the taxpayer has in the other country. Double taxation is relieved by the granting of a credit in the country of residence for tax paid in the country where the property is located.

Special provisions have been included in the Agreement which preserve the taxation rights of a State in respect of income and capital gains arising from the exploration or exploitation of the sea bed and subsoil in the territory of that State where such activities are carried on for more than 30 days within any period of 12 months.

In the case of dividends flowing from one of the countries to the other, the Agreement grants to portfolio investors* resident in either of the two countries a tax credit in respect of dividends. The normal tax credit is granted in respect of Irish dividends flowing to Finland. In the case of dividends flowing from Finland to Ireland a tax credit of one-half of that to which a Finnish individual resident would be entitled is granted. Where appropriate, repayment of the tax credit provided for in the above provisions will be made to the portfolio investor subject to a liability to tax in the country where the dividend originates not exceeding 15 per cent of the aggregate of the dividend and the tax credit.

* A share-holder who is an individual or a company other than a company which, directly or indirectly holds 10 per cent or more of the voting power in the company resident in the other Contracting State which pays the dividend.

No payment of a tax credit will be made in respect of a dividend, the beneficial owner of which is a direct investor**. However, no withholding taxes will be levied on such a dividend in the country of source.

** A company which, directly or indirectly, holds 10 per cent or more of the voting power in the company paying the dividend.

Under the terms of Article 24, the benefit of the Irish tax incentive relief is preserved for all dividends and branch profits flowing from Ireland to Finland. Dividends paid by an Irish company to a Finnish company which controls at least 10 per cent of the voting power of this company will be exempt from Finnish tax. In the case of other Irish dividends paid to residents of Finland and profits derived by a Finnish company from the activities of a branch of that company in Ireland, Finland will allow as a deduction from the Finnish tax due on that income an amount equal to the full rate of Irish tax on that income, even if that income has only been subject to Irish tax at the rate of 10 per cent, in accordance with the Irish tax incentive legislation.

Provision is made for safeguarding nationals and enterprises of one country against discriminatory taxation in the other country, for consultation between the competent authorities of the two countries for the purpose of resolving any difficulties or doubts arising as to the interpretation or application of the Agreement and for the exchange of such information between these authorities as is necessary for the carrying out of the provisions of the Agreement or of the domestic law of either State in relation to the taxes covered by the Agreement.

As a result of the introduction of an imputation system in Finland with effect from 1 January, 1990, Finland is prepared from that date to pay a tax credit to Irish residents in the circumstances set out in Article 11. Accordingly, the Agreement has been framed to come into force in 1990. The Agreement will be effective in Ireland as follows

(i) as respects income tax and capital gains tax, for any year of assessment beginning on or after 6 April 1990; and

(ii) as respects corporation tax, for any financial year beginning on or after 1 January 1990.

6. Gains from the alienation of any property other than that referred to in the preceding paragraphs of this Article, shall be taxable only in the Contracting State of which the alienator is a resident.

ARTICLE 15

Independent Personal Services

7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

ARTICLE 9

Shipping and Air Transport

8. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

ARTICLE 6

Limitation of Relief

Where, under any provision of this Agreement, income or gains is or are wholly or partly relieved from tax in a Contracting State and, under the laws in force in the other Contracting State, an individual, in respect of the said income or gains, is subject to tax by reference to the amount thereof which is remitted to or received in that other State, and not by reference to the full amount thereof, then the relief to be allowed under this Agreement in the first-mentioned State shall apply only to so much of the income or gains as is remitted to or received in that other State.

ARTICLE 7

Income from Immovable Property

S.I. No. 289 of 1993.

DOUBLE TAXATION RELIEF (TAXES ON INCOME AND CAPITAL GAINS) (REPUBLIC OF FINLAND) ORDER, 1993.

WHEREAS it is enacted by

section 361

(1) of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 86

of the

Finance Act, 1974

(No. 27 of 1974),

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), that if the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of income tax, corporation tax or capital gains tax and any taxes of a similar character, imposed by the laws of the State or by the laws of that territory, and that it is expedient that those arrangements should have the force of law, the arrangements shall, notwithstanding anything in any enactment other than

section 47

of the

Finance Act, 1983

, have the force of law

AND WHEREAS it is further enacted by section 361 (6) of that Act that where such an order is proposed to be made, a draft thereof shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann

NOW, the Government, in exercise of the powers conferred on them in

section 361

of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), hereby order as follows